The Groceries Code Adjudicator Bill was given Royal Assent today, creating the UK’s first independent adjudicator to oversee the relationship between large supermarkets and their direct suppliers.
Competition Minister Jo Swinson said:
This government is committed to ensuring that all businesses have access to fair and open markets.
The Groceries Code Adjudicator will make sure that large supermarkets abide by the Groceries Supply Code of Practice, and treat their suppliers fairly and lawfully. This will give suppliers the stability to help them grow, innovate and compete in the market. That is why I’m delighted the Bill achieved Royal Assent today.
I am sure that the Adjudicator will make strides towards delivering fairer food supply chains and stronger growth in the industry.
The Groceries Code Adjudicator has been established to enforce the Groceries Supply Code of Practice. The Code regulates the relationship between the ten largest supermarkets, with an annual turnover of £1 billion, and their direct suppliers. The Code was established by the Competition Commission in 2010, after their 2008 market investigation found some large retailers were transferring excessive risks to their direct suppliers.
The Adjudicator can:
- arbitrate disputes between retailers and suppliers
- investigate confidential complaints from direct and indirect suppliers, whether in the UK or overseas, and from third parties
- hold to account retailers who break the rules by ‘naming and shaming’ or, if necessary, imposing a fine.
Earlier this year it was announced that Christine Tacon had been appointed as the Adjudicator-Designate. Ms Tacon has held numerous roles within the food and farming industries, and in 2004 was awarded a CBE for services to agriculture.
The Act will come into force in June. The Adjudicator will publish guidance shortly after this, setting out how she will operate.
Notes to editors
The Act and accompanying documents can be viewed on the parliament website
The Groceries Code was created by Order of the Competition Commission in the Groceries (Supply Chain Practices) Market Investigation Order 2009. It is legally binding on retailers.
The Competition Commission’s report into the Groceries Market from 2008 can be found on their website
The Groceries Code applies to the 10 retailers with a turnover in the groceries market in excess of £1 billion.
The proposed maximum level of fine suggested by the Adjudicator will be established by Order by the Secretary of State, taking into account the Adjudicator’s recommendation. Retailers would have a full right of appeal against any fines imposed.
- The Groceries Supply Code of Practice was put in place by the Competition Commission in 2010 and obliges large retailers to:
- deal fairly and lawfully with their suppliers
- not vary supply agreements retrospectively, except in circumstances beyond the retailer’s control which are clearly set out in the supply agreement
- pay suppliers within a reasonable time.
- In addition, the Groceries Supply Code of Practice:
- limits large retailers’ power to make suppliers change their supply chain procedures
- limits large retailers’ power to make suppliers pay marketing costs and compensation for wastage
- requires large retailers to pay compensation for forecasting errors in certain circumstances
- limits large retailers’ power to make suppliers obtain goods or services from third parties who pay the retailer for that arrangement
- limits large retailers’ power to make suppliers pay them for stocking their products;
- limits large retailers’ power to make suppliers pay for promotions
- requires large retailers to take due care when ordering for promotions
- limits large retailers’ power to make suppliers pay for resolving customer complaints
- limits large retailers’ power to ‘de-list’ suppliers in other words, to stop dealing with a supplier or make significant reductions to the volume of purchases from a supplier.
- The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries.’ It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.